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Ampio Pharmaceuticals thinks it has a new way to combat joint pain caused by osteoarthritis, and the growing Colorado biotech company is spending millions so it can hit the ground running if it gets FDA approval for its treatment.

Greenwood Village-based Ampio announced Monday that it is beginning a 500-patient Phase III pivotal clinical trial for Ampion, an anti-inflammatory molecule derived from human blood. Because it occurs naturally in the body, the molecule is expected to have few side effects, Ampio's chief regulatory officer Vaughan Clift said in a recent interview.

Ampio's new study will include patients between the ages of 35 and 85 who have knee pain caused by osteoarthritis. Study volunteers will be injected in the knee with a 4 milliliter dose of the molecule or a placebo, and their condition will be monitored for 20 weeks.

Clift said prior studies have already shown that Ampio's drug reduces osteoarthritis pain as well as drugs such as Vicodin or oxycodone but without the side effects and risk of addiction. It also provides relief for patients who have progressed through the typical osteoarthritis treatment regimen. That includes over-the-counter and prescription non-steroidal anti-inflammatory drugs in the early stages of the disease, followed by COX-2 inhibitors such as celecoxib (Celebrex) and then regular injections of hyaluronic acid, which replaces joint fluid and helps lubricate the joint.

If the condition worsens, the final treatment is surgery to replace the joint.

Ampio believes that its medication is better than COX-2 inhibitors and hyaluronic acid for managing the pain and says it has data showing it can treat severe cases that previously were untreatable by pharmaceuticals.

"We've had an effect on a population of patients for which there is no therapy, the patients in the most severe stages of the disease," Clift said.

There are about 27 million people with osteoarthritis, according to a National Institutes of Health report. That number is expected to grow as baby boomers age. The increase in obesity rates also could make the number climb, as carrying extra weight accelerates the wear on joints, Clift said.

If Ampion proves successful treating the condition when it affects the knee, Ampio will then try using it to treat pain in other joints and other illnesses.

"The applications of this drug are much, much bigger than just osteoarthritis of the knee," Clift said. "This is just our place to begin."

As of now, the market for osteoarthritis drugs is about $3.1 billion, and it is dominated by COX-2 inhibitors, according to Ampio.

Ampio expects to have results from the new trial in the third quarter of 2014. If all goes according to plan, Ampio could be selling the drug by mid 2015.

In the meantime, the company is already taking steps to be ready to produce and market the medication. On Friday, it started work on a new $7 million facility south of Denver. The building will include a research and development lab, a manufacturing setup able to produce Ampion at commercial scale, and room to consolidate business operations under a single roof.

Ampio, which was founded in 2010 and went public the next year, currently employs 18 people and has a market cap of $369 million. CEO Mike Macaluso said it plans to scale up "dramatically," and it could double its headcount. The new facility will give it the ability to manufacture 10 million doses of Ampion per year.

On the financial front, Ampio is trying to raise $100 million through a shelf offering, according to a prospectus filed with the SEC. In its last quarterly report, Ampio said it had $32 million in cash. It has yet to generate significant revenue.

How Ampio will sell the drug remains to be determined. Macaluso said the company is looking at a number of options, including selling it to a larger company or partnering with someone in a commercialization deal. It also could develop an in-house sales force or contract with a firm that would provide a sales team.

While the company expects Ampion to be a winner, it isn't the only product it is working on. Also in the pipeline, in Phase II testing, is a treatment for diabetic macular edema and diabetic retinopathy, conditions that can lead to blindness.

Ampio also has been busy on the corporate restructuring side. Late last year, it announced plans to spin off a new company focused on developing a treatment for premature ejaculation. The company, named Vyrix Pharmaceuticals, is expected to have an initial public offering sometime this year.

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